Filed: Oct. 14, 2013
Latest Update: Mar. 28, 2017
Summary: Case: 13-50133 Document: 00512405662 Page: 1 Date Filed: 10/14/2013 IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT United States Court of Appeals Fifth Circuit FILED October 14, 2013 No. 13-50133 Lyle W. Cayce Summary Calendar Clerk In the Matter of: THOMAS A. CIPOLLA, Debtor THOMAS A. CIPOLLA, Appellant v. C. DANIEL ROBERTS, Trustee, Appellee Appeal from the United States District Court for the Western District of Texas USDC No. 1:12-CV-791 Before HIGGINBOTHAM, DENNIS, and GRAVES,
Summary: Case: 13-50133 Document: 00512405662 Page: 1 Date Filed: 10/14/2013 IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT United States Court of Appeals Fifth Circuit FILED October 14, 2013 No. 13-50133 Lyle W. Cayce Summary Calendar Clerk In the Matter of: THOMAS A. CIPOLLA, Debtor THOMAS A. CIPOLLA, Appellant v. C. DANIEL ROBERTS, Trustee, Appellee Appeal from the United States District Court for the Western District of Texas USDC No. 1:12-CV-791 Before HIGGINBOTHAM, DENNIS, and GRAVES, C..
More
Case: 13-50133 Document: 00512405662 Page: 1 Date Filed: 10/14/2013
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
October 14, 2013
No. 13-50133 Lyle W. Cayce
Summary Calendar Clerk
In the Matter of: THOMAS A. CIPOLLA,
Debtor
THOMAS A. CIPOLLA,
Appellant
v.
C. DANIEL ROBERTS, Trustee,
Appellee
Appeal from the United States District Court
for the Western District of Texas
USDC No. 1:12-CV-791
Before HIGGINBOTHAM, DENNIS, and GRAVES, Circuit Judges.
PER CURIAM:*
In Chapter 7 bankruptcy proceedings, Debtor Thomas A. Cipolla claimed
a homestead exemption under Texas law. The Trustee objected to the exemption
*
Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR.
R. 47.5.4.
Case: 13-50133 Document: 00512405662 Page: 2 Date Filed: 10/14/2013
No. 13-50133
under 11 U.S.C. § 522(o). The bankruptcy court has twice sustained the
Trustee’s objection. The district court affirmed. We also affirm.
I. Factual and Procedural Background
This is the second time that this case has been before this court. As the
district court did, we repeat the factual summary given in the prior appeal:
Cipolla graduated from law school in Texas in 1975 and obtained
licenses to practice law in Texas and Missouri. He practices as an
arbitrator and mediator in the area of labor and employment law
and maintains offices in Dallas, Texas and St. Louis, Missouri.
In 1985, Cipolla acquired a partial interest in a residential property
in St. Louis (the “Missouri Property”). In 1995, he acquired the
remainder by gift from his parents. In October 1999, Cipolla
contracted to buy a condominium on South Padre Island, Texas (the
“Texas Property”) for $100,000. He obtained a home equity loan of
$76,000 in January 2000 by encumbering the previously
unencumbered Missouri Property. On March 1, 2000, Cipolla used
the $76,000 in loan proceeds, plus $24,000 in other funds, to
purchase the Texas Property free of any encumbrances. Cipolla
asserts that he encumbered the Missouri Property rather than the
Texas Property because he obtained the loan from Commerce Bank
in Missouri, with which he had a prior relationship, and that bank
had no interest in securing its loan with a lien on the Texas
Property.
Cipolla states that at the time he purchased the Texas Property, he
intended it to be a recreational and long-term retirement property.
In approximately March 2001, however, Cipolla decided to make the
Texas Property his principal residence. He continued to maintain a
home office at the Missouri Property, but he never again voted in
Missouri or had a Missouri driver’s license.
Over the next decade, Cipolla incurred considerable debt which
eventually led him to file for bankruptcy and which remained
outstanding at the time of filing. Cipolla had twice borrowed
additional sums using the Missouri Property as collateral: $16,000
in March 2002, and another $56,000 in March 2005. Notably, the
Texas Property remained unencumbered. Cipolla also amassed
substantial unsecured debts from 2000 through 2009.
2
Case: 13-50133 Document: 00512405662 Page: 3 Date Filed: 10/14/2013
No. 13-50133
Cipolla filed for bankruptcy under Chapter 7 on May 7, 2009, and
claimed the Texas Property in its entirety as exempt from his
creditors under Texas’s unlimited homestead exemption law.
Missouri, by contrast, currently limits the available homestead
exemption to $15,000. At the time Cipolla moved to Texas, Missouri
limited the homestead exemption to $8,000. Cipolla asserts that he
had no knowledge of the Missouri or Texas homestead exemption
laws when he moved to Texas.
Relying on 11 U.S.C. § 522(o), the Trustee objected to the exemption
of the Texas Property to the extent that it was purchased with funds
borrowed against the Missouri Property. Under § 522(o), a debtor
cannot claim a homestead as exempt to the extent that the debtor’s
interest in that property is attributable to non-exempt property
disposed of during the ten years preceding the bankruptcy filing
“with the intent to hinder, delay, or defraud a creditor[.]” After an
evidentiary hearing, the bankruptcy court sustained the Trustee’s
objection.
Cipolla timely appealed that ruling to the district court. Before the
district court ruled on the appeal, however, Cipolla filed a motion in
the bankruptcy court for relief from judgment under Fed. R. Civ. P.
60(b) on the ground that he had made a mistake in his testimony at
the evidentiary hearing as to the year in which a lawsuit had been
filed against him. The bankruptcy court denied that motion.
Subsequently, the district court largely affirmed the bankruptcy
court’s original ruling, sustaining the Trustee’s objection and
denying the full homestead exemption claimed by Cipolla. The
district court did, however, reverse the bankruptcy court on two
subsidiary issues: (1) an evidentiary presumption that the
bankruptcy court had applied in the course of reaching its
conclusion, and (2) the portion of the value of the Texas Property
that should be considered non-exempt. Cipolla timely appealed the
district court’s ruling.
In re Cipolla (Cipolla I), 476 F. App’x 301, 303-04 (5th Cir. 2012) (footnotes
omitted). In that appeal, we held, inter alia, that the bankruptcy court erred by
imputing knowledge of the homestead exemptions of Texas and Missouri to
Cipolla because he is a lawyer. Id. at 308. We remanded the case for the
bankruptcy court to reconsider the facts and evidence supporting its factual
3
Case: 13-50133 Document: 00512405662 Page: 4 Date Filed: 10/14/2013
No. 13-50133
findings without the presumption concerning Cipolla’s knowledge as an attorney.
Id. at 308-09.
On remand, the bankruptcy court again sustained the Trustee’s § 522(o)
objection to Cipolla’s homestead exemption. The district court again affirmed
the bankruptcy court, finding that it had “essentially nothing to review” because
it had previously reviewed and affirmed the bankruptcy court’s factual findings,
and was constrained by the law of the case doctrine. In the alternative, the
district court again reviewed and affirmed the bankruptcy court’s findings on the
merits. Cipolla timely appealed.
II. Discussion
We review the decision of the bankruptcy court under the same standards
applied by the district court hearing the appeal from the bankruptcy court;
“conclusions of law are reviewed de novo, findings of fact are reviewed for clear
error, and mixed questions of fact and law are reviewed de novo.” In re Nat’l
Gypsum Co., 208 F.3d 498, 504 (5th Cir. 2000). “A finding of fact is clearly
erroneous only if on the entire evidence, the court is left with the definite and
firm conviction that a mistake has been committed.” Robertson v. Dennis,
330
F.3d 696, 701 (5th Cir. 2003) (quotation omitted). “If the district court’s
account of the evidence is plausible in light of the record viewed in its entirety,
the court of appeals may not reverse it even though convinced that had it been
sitting as the trier of fact, it would have weighed the evidence differently.”
Anderson v. City of Bessemer City, N.C.,
470 U.S. 564, 573-74 (1985).
11 U.S.C. § 522(o) provides that the value of exempt property a debtor uses
as a homestead “shall be reduced to the extent that such value is attributable to
any portion of any property that the debtor disposed of in the 10-year period
ending on the date of the filing of the petition with the intent to hinder, delay,
or defraud a creditor. . . .” 11 U.S.C. § 522(o). We have previously set forth
4
Case: 13-50133 Document: 00512405662 Page: 5 Date Filed: 10/14/2013
No. 13-50133
several principles that govern review of a finding of intent to defraud under this
section.
First, a finding of intent to hinder, delay, or defraud is a factual
finding that is reviewed for clear error. Second, evidence of actual
intent to defraud creditors is required to support a finding of intent
sufficient to deny a discharge. Constructive intent is insufficient.
Merely converting non-exempt assets to exempt assets within the
look-back period is not fraudulent per se; additional evidence of
intent to defraud is required. And, because direct evidence of intent
is usually unavailable, actual intent may be inferred from
circumstantial evidence.
Cipolla I, 476 F. App’x at 306 (quotations and footnotes omitted). Among the
circumstantial evidence of intent to defraud that a court may look to are the
“badges of fraud” in state fraudulent conveyance laws, including the Texas
Uniform Fraudulent Transfer Act (“TUFTA”). Id. TUFTA lists eleven non-
exclusive badges of fraud. See Tex. Bus. & Com. Code § 24.005(b). On remand,
the bankruptcy court found that the following four were present in this case:
(1) the transfer or obligation was to an insider;
(2) the debtor retained possession or control of the
property transferred after the transfer;
(3) the transfer was of substantially all the debtor’s
assets; and
(4) the transfer occurred shortly before or shortly after
a substantial debt was incurred.
“Not all, or even a majority, of the badges of fraud must exist to find actual
fraud. Indeed, when several of these indicia of fraud are found, they can be a
proper basis for an inference of fraud.” In re Soza, 542 F.3d 1060, 1067 (5th Cir.
2008) (internal quotation marks omitted) (quoting Roland v. United States,
838
F.2d 1400, 1403 (5th Cir. 1988)).
5
Case: 13-50133 Document: 00512405662 Page: 6 Date Filed: 10/14/2013
No. 13-50133
The bankruptcy court found that the four badges of fraud were sufficient
to show that Cipolla acted with intent to defraud creditors. The bankruptcy
court noted that Cipolla had converted his only significant non-exempt asset to
exempt, by so doing had completely encumbered the non-exempt Missouri
property, and had subsequently accrued over $300,000 in unsecured debt. In
these circumstances, the bankruptcy court found that Cipolla acted with intent
to defraud creditors as provided by § 522(o). On appeal, as he did in the district
court, Cippola raises several challenges to the bankruptcy court’s findings and
analysis concerning the four applicable badges of fraud, and challenges the
ultimate factual finding that he acted with intent to defraud.
Cipolla first asserts that the relevant transfer did not involve substantially
all of his assets. See Tex. Bus. & Comm. Code § 24.005(b)(5). In his first appeal
to this court, Cipolla waived this argument. Cipolla I, 476 F. App’x at 307-08.
Thus, he may not resurrect that assertion here. See Lindquist v. City of
Pasadena Texas, 669 F.3d 225, 239-40 (5th Cir. 2012).
Cipolla next argues that he did not “transfer” property under the
commonly understood definition of the term. To the extent that Cipolla raises
this argument as a challenge to the applicability of § 522(o), it is foreclosed by
the law of the case doctrine. “The law-of-the-case doctrine ‘posits that when a
court decides upon a rule of law, that decision should continue to govern the
same issue in subsequent stages in the same case.’” United States v. Castillo, 179
F.3d 321, 326 (5th Cir. 1999) (quoting Arizona v. California,
460 U.S. 605, 618
(1983)). Section 522(o) does not use the term “transfer,” but rather focuses on
the “dispos[al]” of property. 11 U.S.C. § 522(o). Cipolla I resolved this issue
when it held that:
It is true that this transfer of assets . . . did not occur all at once, but
each of the relevant steps in that process took place within the ten
years before Cipolla filed his bankruptcy petition. Thus, Cipolla
disposed of a portion of a non-exempt asset, and transferred that
6
Case: 13-50133 Document: 00512405662 Page: 7 Date Filed: 10/14/2013
No. 13-50133
value to property that was exempt as a homestead, within the
contemplation of § 522(o).
Cipolla I, 476 F. App’x at 306. To the extent that Cipolla raises this issue as a
challenge to the applicability of TUFTA, he has apparently waived it by not
raising it in the first appeal. See Lindquist, 669 F.3d at 239-40. Even if not
waived, this argument fails. The definition of “transfer”in TUFTA is broad,
providing that it covers “every mode, direct or indirect, absolute or conditional,
voluntary or involuntary, of disposing of or parting with as asset or an interest
in an asset, and includes payment of money, release, lease, and creation of a lien
of other encumbrance.” Tex. Bus. & Comm. Code § 24.002(12). The text of this
definition encompasses the action that Cipolla took here: creating a lien on the
Missouri property to obtain a loan, which he used to purchase the Texas
property.
Cipolla next asserts that the length of time the bankruptcy court used to
determine whether he incurred substantial debt “shortly” after the transfer was
too long. See Tex. Bus. & Comm. Code § 24.005(b)(10). His argument that the
court erred as a matter of law is foreclosed by the law of the case doctrine. See
Castillo, 179 F.3d at 326. Cipolla I specifically held that “the bankruptcy court
did not err as a matter of law by considering the entire course of Cipolla’s
finances after he made the transfer at issue, although those debts which he
incurred closer in time to the transfer are clearly more relevant to his intentions
when the transfer took place than those which he incurred later.” Cipolla I, 476
F. App’x at 309. To the extent Cipolla argues that the bankruptcy court erred
in its factual findings, in reexamining the evidence on remand, the bankruptcy
court clearly referenced Cipolla I’s direction as to the relative weight to be given
to earlier and later incurred debts, and again found substantial debt incurred
shortly after the purchase of the Texas property. As the district court noted, a
significant portion of the total §300,000 was in fact incurred close in time to the
7
Case: 13-50133 Document: 00512405662 Page: 8 Date Filed: 10/14/2013
No. 13-50133
Texas property purchase, including $16,000 borrowed against the Missouri home
in 2002, a Wells Fargo business line of credit for $105,000 taken out in 2001 or
2002, and a Bank of America credit card with $33,000 debt incurred in 2003 or
2004. Further, the uncertainty about when each specific debt was incurred
appears to be a result of the debtor’s inability to provide specific records. On the
record as a whole, we find no clear error in these factual findings.
Next, Cipolla contends that the finding that as a lawyer, he was presumed
to be aware of the homestead exemptions allowed by Texas and Missouri, is a
“bell that cannot be unrung,” which somehow continued to infect the bankruptcy
court’s findings. There is no support for this argument. Both courts clearly
stated and applied this court’s holding that Cipolla’s status as an attorney was
an improper factor for consideration.
Cipolla also argues, somewhat inexplicably, that the bankruptcy court
improperly considered “demeanor” in judging his credibility. The district court’s
reference to demeanor was not improper, and was simply a recognition of the
fact that the bankruptcy court had heard Cipolla’s testimony, judged his
credibility, and weighed it along with the other evidence. We will not disturb the
bankruptcy court’s credibility determinations on appeal. See, e.g., Dunbar Med.
Sys., Inc. v. Gammex Inc., 216 F.3d 441, 453 (5th Cir. 2000); Fed. R. Civ. P.
52(a)(6).
Cipolla’s remaining argument that the bankruptcy court erred in its
ultimate finding that he acted with actual intent to defraud creditors essentially
asks this court to reweigh all the evidence and decide that his version of events,
including his own account of his subjective motivations, is more plausible than
the evidence judged by the bankruptcy court to be indicative of intent to defraud.
However, that is not the function of an appellate court reviewing findings of fact.
See Anderson, 470 U.S. at 573-74. On this record, which has now been reviewed
twice each by the bankruptcy court, the district court, and this court, the
8
Case: 13-50133 Document: 00512405662 Page: 9 Date Filed: 10/14/2013
No. 13-50133
evidence supports the findings that four TUFTA badges of fraud apply, and that
there is sufficient circumstantial evidence supporting the bankruptcy court’s
ultimate finding that Cipolla acted with intent to defraud under § 522(o).
III. Conclusion
For the foregoing reasons, we AFFIRM.
9
